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The Australian Small Business Blog

Thursday, June 28, 2012

Making Your Business Run Without You

Imagine for a minute. You are on a tropical island, laying by a pool on a banana lounge. Your biggest concern right now is whether you will have another swim, or order another drink. Your mobile trilling the James Bond theme interrupts your resolution of this most vexing issue, and you see you have just received a text.

Curiously, you check out the text and it says $30k has just been deposited into your bank account. Then you check your messages. You have also received an email from your office. It is your monthly report. When you download it, you can see an activity report, with highlights of the month, the sales figures, and profit analysis for the time you have been away. You can see a list of current issues and the plans to address them along with forecasts for the next month.

You consider for just a second, whether you will call your office, and then think to yourself “Nah, they are doing fine without me.” You then attract the attention of the pool waiter, and order a pina colada.

Is that how it is when you are away from your business for any length of time? Or rather, when you return, all the issues that were there when you left, are still there. In addition, sales have been sluggish and new problems have arisen. You almost wish you had never gone away.

This is the unfortunate reality for many small business owners. Even though they have been operating for some time, and may have achieved a reasonable amount of success, their business still depends too much on themselves. They may even have some great systems for key parts of the business developed over years of trial and error which usually work quite well. The piece that is missing is no-one is driving the business when the owner is away.

Short of being on the phone all the time, how can you know that things are going as they should in your absence? The answer is through reporting. Creating a series of reports around the key areas of your business enables you to manage it while you are away. Even if you don’t read the reports in detail, what gets reported, gets done because those that are doing the reporting know that from the questions you ask, you do read them and you use these reports to hold them to account.

Reports are like the gauges in the cockpit of a 747. A plane has many more moving parts than most small businesses. The pilots are unable to watch every single part, but they do keep an eye on a much smaller number of indicators such as airspeed, altitude and fuel level. If one of these falls out of range the pilot is quickly able to use this information to isolate one of the many possible causes.

For the owner of a business these gauges may be Cash at Bank (fuel), a Work-in-Progress Report (airspeed) and Sales (altitude). Other indicators may be unit costs, job costs vs budget, wastage, absenteeism plus many others. Each of these indicators can flag underlying issues, ranging from procedures not being followed, to performance problems.

However these reports are only effective if staff see that you use them and you check for yourself from time to time the data in the reports (for example, through an audit, formal or informal).

Reporting is an essential part of your systems. In fact, each system must have a reporting component, or else how can you know it is being followed?

In the rather higher risk occupation of a pilot, their pre-flight checks and pre-landing checks have to be witnessed (by the co-pilot) and signed off. The pilots also know if there is a near miss incident, all this reporting will be reviewed. This is also backed up by regular training and tests they must pass to keep their licence. That is, there is not a reliance just on paperwork which may bear no resemblance to reality.

For most businesses, such a level of scrutiny is unnecessary. To determine the level required in your business, identify the issues that arise within it. The level of checks and reporting in the airline industry arose out of major failures that occurred in the early life of the industry and even after 100 years of flying, it is still changing.

Business owners need to understand the drivers of their business and ensure that reports are created for each part. These should be used to improve your systems, to manage your operations and to hold staff to account.

With your reports in place, you can catch a plane to a tropical island, comfortable in the knowledge that you can leave the flying to the pilots and your staff back home.